Financing Strategies – All Proper Ways to Get the Necessary Funding From the Right Places

Question: How can I define my financing needs while evaluating the business?Answer: Good question. It is important to consider a couple of factors. When looking for funds, you can’t simply ask for the down payment or the price to purchase the business. You should also forecast the capital requirements to properly operate and build the business once you’ve acquired it. Many buyers approach the financing process in two steps. The first step is to borrow for the down payments or purchase price of the business. The other is for operating expenses. In doing so, they exhaust their capital or borrowing power in the first step process and can’t obtain financing in the later stage of the business. These buyers are unsuccessful because the collateral has been used against the purchase of the business and
is therefore not available to accommodate additional financing. Make sure to analyze your needs first and always anticipate what your financial needs will be in the next few months.
This way, you can borrow once and use this money not only for the purchase, but also for further expenses that might come along.Question: What other kind of expenses will I need to use the money for?Answer: When projecting your financing requirements, you should take into consideration these expenses:
1) Renovate and modernize the business facilities,
2) Add or replace needed fixtures and update equipment,
3) Maintain adequate working capital (wages, insurance etc…)Question: How can I avoid looking like an amateur when I approach the bank?Answer: Banks certainly do not lend money to amateurs. To be a “professional borrower”, the most essential source of information you can have is who to talk to at the bank. I say that because, most likely, you will end up talking to a junior officer, and although that person may be welcoming and cordial, he or she does not have the experience level necessary for your demands. Because they are in an entry-level position, they may try minimizing their risk by not giving any loans. If the borrower defaults on the loan, the blame might be deferred to the lender. The best approach is to meet with the senior lending officer, the manager, or the bank president to avoid losing precious time and the valuable patience you need to save for the negotiation.Question: How do I sell my proposal like a “pro”?Answer: As mentioned earlier, you need to have completed a loan application proving good credit history, solid cash flow, and managerial experience. What the bank needs to know is your name, address, family status, education, and experience in related business, personal assets and liabilities, and credit references. A concise description of the business you want to buy or start, its lease terms, a brief history of the business (if you’re buying), the business’ tax returns and financial statements dating back three years, the projected cash flow statement for the loan period, and a list of proposed changes you intend to make in the business are also required. Additionally, the bank needs to know the business’ assets and their liquidation values. And finally, you need to tell them how much money you want to borrow from them and for how long.

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